Tesla is still the ‘category king’ in the EV space amid stock performance, price targets: Analyst

Let's get you up to speed on Tesla trending ticker on Yahoo Finance today. The stock moving down more than 4% today up though. Almost 70% this year so far. Define the odds after that Rocky 22 and continued issues in the new year. Joining us now with more on this is Craig Irwin, Roth Capital Partners Senior Research Analyst. Craig, good to see you my friend. You've got a neutral rating and $85 price target.

Why and what do you make of the rally so far with Tesla this year? So Tesla had some pretty violent moves to the downside last year. A lot of that was due to Twitter and people really want Mr. Musk to focus his time at Tesla. You know, okay he's going to spend more time than we like at Twitter but Tesla is getting the right attention. So you know you've seen the value come back into the stock that came out primarily because Twitter. The negative revisions to forecast expectations of $1.5 million brought down to $1.

4 million. That's still some pretty amazing growth and these guys are category king in the EVs. So a lot of people want to own Tesla but we're bearish on Tesla. We see Tesla is a great company but we think there's going to be some real winners. The 100 or so EV models are supposed to hit the road this year. Many of those will be just as compelling as the lightning or the Porsche Taycan or pick your car. Kia's got some great cars that are selling well.

The Mach-E. Tesla is going to have some real pressure in the back end of this year just like they faced in the back end of last year and that is going to impact margins. Now margins have been overlooked for the near term. We're going to have some chunky margin pressure and everybody's waving that away to buy back into the stock just trying to pick a bottom. Our view is we should be cautious and probably better off in some of the other names in the space given that there will be multiple winners in a category that is inevitable. Craig, let's talk a little bit more about two pieces of things you just said. One, the pressures that we could see on margins.

How much pressure do you think we could potentially see? You said that Tesla compared to some of the other where you're calling winners out there, who do you think is going to beat Tesla? A lot of the benefit that's come back into momentum in the stock is price cuts. A lot of people jumped in for price cuts. People that are buying on price cuts are not exactly prone to auction things heavily. You're mixing towards a lower margin crowd of buyers with an already margin direct price cut. I think we're probably looking towards more like a thousand basic points in margin degradation over the next couple quarters instead of basically five, six, seven hundred. That's heavy pressure. A lot of people want to look beyond that and say, wave it away because they've done a great job on margins but not so great if you take out the ZEV credits and all the other credits.

And then you factor where the mix is going to go in 24 and 25. They have to launch the mini car. That's going to be a fundamentally lower margin car and all their vehicles are starting to look pretty long in the tooth. So that also doesn't speak highly of attractive margins going forward. So yes, it's a growth stock. It's valued like a growth stock and they have got growth going again and they deserve credit for that. But I think that they're going to have a hard time really sustaining a multiple over the longer term, particularly given that the competition is looking very credible.

You had me at Ford F-150 Lightning. That's always how you get my attention. But when it comes to GM versus Ford in that EV space, how has that narrative changed given the recall there at Ford and how do you think that story plays itself out this year? You know, EVs are tough, right? This is new technology. There's a lot of learning that happens. We would prefer that none of it really makes its way into the public. I mean, I guess what, Tesla just had a fairly chunky recall of its FSD, full self-driving. I think of that as a misnomer.

But the reality is there's learning that goes along after these vehicles are launched. Fortunately, very little of it is catastrophic lessons. Most of it is fairly low cost to address. It doesn't bother me. I've driven an EV now for the last couple of years. My car's had a couple recalls. It doesn't bother me.

I just kind of accept this the way that we do when there's recalls of the combustion engine vehicles that we own. And many of those do have recalls to address issues that the OEMs would prefer never happen as well. All right. It's maybe a bit of an overreaction. Then Ford shares off once again today. Craig Irwin, great to have you. Roth Capital Partners, senior research analyst.

Thanks so much.

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